Lessons Learned From My Last BRRR Milwaukee WI

[Demetrius Lindsey]

[Update] Some lessons learned our latest BRRR.

Location: Milwaukee

Purchase Price:$75k

Rehab: $6k

ARV: $115-124k (comps with light rehab)

Rent: $1,100

Bank used for refi: Pentagon Federal 

Interest Rate: 3.375%

Neighborhood: B-This property needed very little work to it. Floors, a little paint, new water heater, refresh in the bath not much. We started the refinance process two weeks after we closed. With in 48hrs of having it listed for rent we had over 100 inquires. We got a very good screened tenant on a 18 month lease that goes to $1200 after 6 months. Here's the lesson all comps are not equal in the eyes of an appraisal. 

APPRAISAL KILLER: NO BASEMENT!!!!!

Our appraiser refused to look at any comp with a basement. Rather than put a value on it he refused to looked at them. There was a recent sale a block away on the same street for $124k smaller square footage similar finishing's etc. This comp was apart of our analysis to make an offer. The appraisal had comps from Neighborhoods outside of the radius which greatly decreased the valuation. Milwaukee has some big differences in Neighborhoods depending on where you go. After speaking with the appraiser this is common practice we spent an hour on the phone and I got a lot of insight I wish I had going into the deal. But that's how we learn. We also got dinged because of the short seasoning period. If waited to get spring to the refinance we probably would have been able to pull more out. 

Appraisal Valuation:$85k 

Loan amount: $63k

Monthly cash flow: $469

Coc Return: 31% 

We learned and the cash flow makes it a good deal. On to the next scheduled for a January close.

[Richard Neuharth]

Wow! The appraiser should not be allowed to "ding you" because of the length of time you have owned the property. That is not a part of the evaluation they do. They can try to take it into consideration but should not be allowed to lower your value based on how recent you purchased your property. The whole point of investing is to increase the value of a property because it is below market standards. Length of time is not a valuation metric in the comparable analysis. Now, if the other properties without a basement were the same price as you received then I can see that. That is still a good pull though. Nicely done! Thanks for the lessons learned.